Bitcoin users are once again grappling with high transaction fees as the blockchain experiences congestion, with a twist in the cause that may surprise some.
According to data from mempool.space, a platform that tracks Bitcoin transactions, a medium-priority transaction now costs $34.08 to be processed promptly, with over 333,400 unconfirmed transactions waiting for confirmation.
As frustrations mount within the cryptocurrency community on Twitter over Bitcoin’s limited transaction capacity, calls for the adoption of more efficient layer 2 solutions and sidechains are growing louder.
On the flip side, Bitcoin miners are reaping the benefits of increased revenue due to the surge in fees, with earnings doubling per block.
Contrary to previous instances of high fees driven by the Ordinals or Runes protocols, this time around, the congestion is traced back to OKX, a major crypto exchange in Seychelles. Julio Moreno, Head of Research at CryptoQuant, revealed on Twitter that OKX’s internal transactions to consolidate outputs are to blame for the spike in fees.
When users initiate Bitcoin transfers, they must pay fees on each unspent transaction output (UTXO) in their wallet, leading to hefty charges for large transfers. Exchanges, dealing with numerous small incoming transactions and large outgoing transactions, consolidate their UTXOs to cut costs when network fees are low. However, when a major exchange like OKX does this, it drives up fees network-wide, inconveniencing other users.
Looking ahead, a group of developers foresee adding programmability to the Bitcoin blockchain as the next catalyst for the cryptocurrency’s growth. While Bitcoin is currently viewed as digital gold, developers argue that enabling programmability would unlock a plethora of functionalities and applications.
Unlike its competitor Ether, which supports smart contracts and decentralized applications on the Ethereum network, Bitcoin lacks this capability. Despite attempts to address this limitation with “Layer 2” networks like Lightning, aimed at scaling Bitcoin for payment applications, many solutions have been unreliable, with associated bridges susceptible to hacks, causing user concerns.